Oregon Tax Vote Shows States' Plight

By

Joel Millman

Updated Jan. 25, 2010 11:07 a.m. ET

PORTLAND, Ore.—Voters in this state will consider two new tax-increase measures on Tuesday, the culmination of a battle that has unfolded in the state against the backdrop of low state revenue and high unemployment.

ENLARGE

Supporters of Measures 66 and 67 at a rally in Portland Friday.
Associated Press

The twin ballot measures are serving as a gauge of anti-business populism and highlight a nationwide debate over whether to fix state budgets by targeting the affluent. But they are also fueling resentment of "tax and spend" legislators, as well as public-employee unions whose members are enjoying job security at a time when thousands have lost their jobs.

Passage of Measure 66 would increase Oregon's personal-income-tax rate by nearly two percentage points for the state's richest taxpayers. Measure 67 calls for a increasing the state's minimum corporate income tax, currently $10 a year.

Oregon's Democrat-controlled state Legislature crafted the measures to raise $733 million to cover a state budget shortfall. Opponents call the effort unfair, charging that it was concocted via focus group to tap voter anger against "rich" corporations by a legislature too dysfunctional to fix Oregon's unbalanced finances.

On the "yes" side is a coalition of teachers unions and other public-sector employees, joined by many charities who say they fear massive cuts to schools, hospitals and antipoverty programs if the measures don't pass.

On the "no" side are business groups and antitax activists. One prominent opponent is Nike Inc. founder and chairman
Phil Knight,
who dubbed Measures 66 and 67 "Oregon's Assisted Suicide Law II" in a recent letter to the Oregonian, the state's largest daily newspaper.

Both sides have plenty of ammunition, and both largely agree that Measures 66 and 67 are before the voters now only because in 2003 Oregonians rejected state tax reform that would have raised taxes across the board. That vote caused schools to shut down a month early and made Oregon the butt of ridicule in a week's worth of Doonesbury comics.

The debate over the tax measures has been strident at times. "No" campaigners raise the specter of failing small businesses—from the corner bakery to family-owned dairies—if taxes are raised. "Yes" advocates point to the $10 minimum corporate income tax—unchanged since 1931—which they argue lets hundreds of large corporations pay practically nothing each year, including many companies whose headquarters lie out of state.

Big numbers are being wielded on both sides. For example, one "yes" organization released data that said two-thirds of corporations doing business in Oregon pay just $10 a year in income taxes, adding that "last year the average family of four paid $3,100 in taxes. That's more than 300 corporations combined!"

Meanwhile, the group calling itself Oregonians Against Job-Killing Taxes accuses Measure 67 of lashing "suffering, profitless businesses" with new taxes of "up to $100,000" a year, a formula its economists predict will cause the additional loss of 70,000 jobs in Oregon, where unemployment tops 11%.

Measure 67 proposes to tax gross revenue of corporations that don't report a profit. However, few, if any, businesses would see an increase of $100,000 under the measure, Oregon's Legislative Revenue Office reports. The same state agency calculated that more than 97% of Oregon businesses would face an increase of $150 a year, or see no change at all.

"Yes" activists have also been blurry with the facts regarding whether most of the $733 million being raised by the two measures will come from out of state.

At a recent debate held at Portland's Mittleman Jewish Community Center, former Democratic Senate candidate Steve Novick singled out Cincinnati-based Procter & Gamble as the type of corporation, "75% of them out of state," whose contribution to Oregon will increase with passage.

Some in the audience thought that implied P&G had been paying just the $10 minimum corporate income tax. A spokeswoman for P&G says the $10 corporate minimum is levied only on companies that don't show a profit. P&G, she says, pays corporate income tax at the rate of 6.6%.

Mr. Novick's adversary was Lake Oswego investor and attorney
Bob Wiggins,
representing Oregonians Against Job-Killing Taxes. Mr. Wiggins scored points reminding voters that a "yes" vote would raise personal income taxes in Oregon to 11%, "the highest rate in the U.S." which will force businesses from the state, he said.

Mr. Novick's rebuttal: Corporations are just as likely to leave over quality-of-life considerations, such as failing schools unable to educate a proper work force. "Vermont has higher taxes than Oregon, but a lower unemployment rate," he argued.

Corrections & Amplifications:

Passage of Measure 66 would increase Oregon's personal-income-tax rate by nearly two percentage points for the state's richest taxpayers. An earlier version of this article incorrectly said it would increase the rate by almost 2%.

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